Feb. 25, 2014

Judge Steven Rhodes set April 1 as a deadline to file objections to the city's proposed plan of adjustment. He plans to hold a hearing on the disclosure statement on April 14 and plans to conduct a hearing on the legal issues associated with the plan of adjustment on April 28. / John Meiu/Detroit Legal News Publishing LLC

Rhodes said the fact that the city’s proposed restructuring blueprint might be incomplete is not reason enough to derail the process of deciding whether it should be implemented.

In his first public remarks since Detroit filed its restructuring proposal on Friday, Rhodes told creditors that the city’s recovery must proceed quickly.

He told an attorney for the city’s official retiree committee — whose bills are being paid by Detroit taxpayers — that the city’s restructuring can’t wait much longer.

“We have to get to it,” Rhodes said. “This is not a retail operation with the Christmas season coming.”

Still, Rhodes said he was not ready to judge the “adequacy” of the city’s restructuring documents, called a “plan of adjustment” and “disclosure statement.”

Carole Neville, the retiree committee attorney, told Rhodes that the city’s restructuring plan treats creditors unfairly. She suggested the city may try to win approval for the restructuring plan over the objections of creditors, which would be called a “cram down.”

“There is not a single creditor constituency that supports the plan right now,” Neville said. “We’re looking at a total cram down plan.”

Several major creditors — including bond insurers, the city’s major unions and two pension funds — accused the city of purposely filing an incomplete plan. For example, the disclosure statement is missing several key exhibits, such as a list of contracts that will be rejected.

Detroit bankruptcy attorney Bruce Bennett acknowledged that “there are a few blanks” in the restructuring documents.

“But they will be filled in and they will be filled in fairly rapidly,” he said.

Rhodes told Bennett to keep it simple.

“In my experience, there are two facts that creditors are most interested in determining how to vote,” Rhodes said. “The two facts are: How much am I going to get paid and when?”

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Bennett said the city plans to adjust the disclosure statement to include easy-to-understand information on how retirees will be affected.

The city proposed 34% pension cuts for general retirees and 10% for police and fire retirees. Those cuts would fall to 26% and 4%, respective, if the pension funds agree to support a deal in which the state of Michigan would contribute $350 million, foundations would provide $365 million and the Detroit Institute of Arts would provide $100 million.

That grand bargain would prevent the pension funds from suing the state of Michigan over pension cuts and would allow the DIA to spin off as an independent institution.

Rhodes set April 1 as a deadline to file objections to the city’s proposed plan of adjustment. He plans to hold a hearing on the disclosure statement on April 14 and plans to conduct a hearing on the legal issues associated with the plan of adjustment on April 28.

A trial over whether the plan can be implemented would start June 16 if the case stays on track.